Ethereum Powers the Mainstream Rise of Tokenization

One of the leading and thriving trends in the cryptocurrency space is tokenization. This act of putting real-world assets (RWA) on-chain has particularly captured the interest and attention of institutions. And this year, tokenization has finally moved beyond just a buzzword to a reality that is now multi-billion-dollar strong. 

This boom is currently being led by Ethereum (ETH -0.54%), accounting for about 58% of the total market, which now boasts more than $250 billion in tokenized assets.

The Foundation for Tokenization

Over the last decade and a half, since Bitcoin (BTC -0.26%) first came into existence, several innovations have helped advance the crypto industry.

The digital store of value that is Bitcoin introduced a decentralized ledger but it was all pretty simple with no support for any complex assets or programmability, for that matter. The $2.2 trillion market cap crypto king is still the same, all these years later but layer 2s are expanding its capability and ecosystem.

It was in 2015 when Ethereum was launched that it completely changed the game by pioneering smart contracts. These digital contracts are executed automatically when the pre-set terms and conditions are met.

ERC-20 and ERC-721 standards, in particular, made token issuance easy and interoperable. The former is to create fungible tokens that are interchangeable and identical in value, while the latter is designed for unique, non-fungible tokens that represent distinct assets. 

The ERC-20 standard is used to create currencies or utility tokens, while the ERC-721 standard is used for collectibles or digital art.

This led to an ICO boom in 2017 which created a massive wave of new tokens. It was around that time that tokenization of real-world assets also first started gaining traction though regulation lagged and interest was rather limited.

At the time, some of the most notable projects included DigixDAO (DGX), which tokenized gold and securities token platforms like tZERO, Securitize, and Polymath. Over time, Security Token Offerings (STOs) started seeing traction, but the US Securities and Exchange Commission (SEC) remained cautious and cracked down on unregistered securities. This led to projects offering tokenization with KYC/AML compliance.

During the last bull run of 2020 and 2021, decentralized finance (DeFi) took off, though its focus remained on crypto-native assets like stablecoins, whose value is pegged to other assets like fiat currencies or commodities.

Stablecoins are actually one of the most successful and widely adopted crypto applications. By pegging the value of a digital asset to a fiat currency like USD, it maintains stability and offers a way to protect capital, hedge against crypto’s volatility, move money across borders quickly and cheaply, and take advantage of crypto’s exciting opportunities.

The combined market cap of all stablecoins is currently $261.6 billion, led by Tether’s USDT (USDT -0%) having a market cap of $158.8 bln and Circle’s USDC (USDC +0.01%) with a $62.4 bln market cap.

While tokens backed by real estate, commodities, US Treasuries, global bonds, private credit, and institutional funds also made their appearance, the demand for them remained rather severely lacking until this cycle.

Real-World Asset Tokenization on Blockchain: A New Era

The narrative surrounding tokenization first began to change in 2023 when institutions started to enter the crypto as well as tokenization space. At the beginning of that year, the total RWA tokenized value was around $5 bln, which surged past $8.5 bln by the end of the year and then to nearly $16 bln by the next year’s end. As the momentum gained, tokenized U.S. Treasuries and bonds exploded in volume.

The likes of BlackRock (BLK -2.59%), Franklin Templeton, JP Morgan (JPM -1.74%), and many other big names have been exploring the world of on-chain. Financial institutions have also been investing funds in related platforms. For instance, the $135 million round for a new L1, “Canton Network,” for stock and bond trading has been led by DRW Capital and Tradeweb Markets with participation from firms like Citadel, DTCC, and Goldman Sachs (GS -0.57%).

At the same time, countries began to work on regulatory clarity, which further supported this movement. Matter of fact, central banks and regulators have also been exploring on-chain asset settlement, including bonds and carbon credits, recognizing the benefits of blockchain to modernize traditional financial systems and address major macroeconomic challenges.

SEC Chairman Paul Atkins has actually called tokenization a significant “innovation.” According to him, the SEC “should be focused on how we advance tokenization in the marketplace.” 

Back in May, the SEC also held a tokenization roundtable before withdrawing a 2019 statement that blocked broker/dealers from offering digital asset securities.

Against this backdrop, the tokenized value has surged 58% in just about the first half of this year to $25.28 billion, excluding stablecoins. Private credit accounts for the majority of it at about 58% followed by US Treasury debt at almost 30% and commodities at 6.3%. The rest of less than 6% is made of institutional alternative funds, stocks, non-US government debt, and corporate bonds.

Interestingly, while the broad crypto market experienced volatility during this time, RWAs continue to show resilience and strength, constantly attracting fresh capital, which is especially true for stablecoins.

A report on the 2025 RWA in On-Chain Finance by blockchain oracle RedStone, published last month in collaboration with Gauntlet and analytics platform RWA.xyz, revealed that real-world asset tokenization has surged 380% since 2022.

This growth indicates that institutions aren’t just experimenting anymore but rather actively involved on-chain. So, the on-chain revolution this time around is not being led by small players but by the biggest financial giants. Marcin Kazmierczak, co-founder of RedStone, told media publication The Defiant:

“They realize the future is a convergence between TrafFi and on-chain finance, and they are acting on it now.” 

He further noted that after stablecoins, RWAs are crypto’s second-fastest-growing sector. The tokenization trend is experiencing this strong growth thanks to its potential to revolutionize industries like private equity and real estate by improving liquidity for assets that are traditionally illiquid.

This is achieved by representing real-world assets as digital tokens on a blockchain. With the foundation of blockchain technology, tokenization offers the benefits of reduced costs, round-the-clock availability, improved transparency, and enhanced liquidity. 

One of the key advantages of tokenization is fractional ownership, which allows individuals to buy just a slice of ownership in assets that they otherwise wouldn’t be able to. The breakdown of high-value assets into smaller, affordable, and tradable units significantly increases investor participation and creates new revenue streams.   

While asset tokenization continues to gain adoption, there are still some challenges that need to be overcome. Regulatory uncertainty continues to be the main one, as the landscape is still evolving. With different authorities having different regulations, this creates compliance complexities for both issuers and investors.

Infrastructure also needs to be improved, with scalability and interoperability being the key issues. If we are going to move trillions of dollars worth of markets on-chain, then we are going to have to build something that can handle value of this much scale that too with a focus on simplicity and user friendliness. 

Security is another key issue. From 51% attacks, compromised devices, network manipulation, phishing attacks, and sybil attacks to weak key management, the risks are many. To maintain investor confidence, security needs to be the priority.

Addressing these challenges can help realize the full potential of the sector, which is expected to be worth multi-trillion dollars in the coming years.

Ethereum Dominates the TradFi Tokenization Adoption

Tokenization is clearly experiencing massive growth and is all primed to help take the crypto space forward as traditional finance (TradFi) giants join in.

Among all the RWA assets, BlackRock’s BUIDL leads the race with a $2.83 bln market capitalization. The BlackRock USD Institutional Digital Liquidity (BUIDL) Fund allows investors to earn U.S. dollar yields by subscribing to it.

US Treasuries actually mark the majority of the asset type among the top ten funds, except for Paxos Gold (PAXG) and Tether Gold  (XAUT) at 2nd and 3rd place with $933.2 mln and $822.2 mln market cap, respectively. 

Coming back to BUIDL, BlackRock partnered with digital securities issuance platform Securitize to launch its first tokenized money market fund on the Ethereum network, and since then, has expanded to other chains too. The asset manager also invested in the company’s $47 million funding round that also attracted investment from Hamilton Lane, ParaFi Capital, and Tradeweb Markets. 

Network-wise, Ethereum is the clear winner, hosting $7.69 billion in value and RWA count above 300.

Tether’s USDT leads the pack on Ethereum. Stablecoins certainly dominate the trend with Circle’s USDC, Ethena’s USDe, and MakeDAO’s USDS being the top four products by value.

Data from Token Terminal, meanwhile, shows that the total value of tokenized assets on Ethereum has reached $6 billion, with the world’s biggest financial services firms tokenizing assets on Ethereum.

So, barring stablecoins, BlackRock is the prominent player driving this growth on Ethereum and is followed by Franklin Templeton (BENJI), whose focus is on US Government Money Fund, then WisdomTree, Superstate, Apollo, and Ondo Finance.

While Ethereum isn’t the sole driver of this trend and is facing competition from other faster and cheaper chains like Solana (SOL -0.47%), Aptos (APT -0.24%), and ZKsync Era, it has already gotten a good head start. With TradFi giants having already deployed billions of dollars on it, Ethereum has set a solid foundation for itself, which should continue to serve it well as the tokenization trend continues to reach new heights.

According to crypto asset manager Bitwise, ETH is actually the top blockchain project to watch due to the ongoing boom in tokenization. 

“The idea of moving stocks, bonds, and other real-world assets over blockchains instead of traditional networks,” Bitwise CIO Matt Hougan wrote in a recent report, “is having a moment.”

What about the price, though? So far, ETH has been the biggest disappointment of this cycle. The $336 bln market cap ETH is currently trading at $2,785, still 43% of its $4,880 ATH, which was hit last cycle.

“I’m starting to think the tokenization narrative could begin impacting the price of related investments sooner rather than later,” wrote Hougan. This, he emphasized, will be driven by the “enormous” market tokenization.

For context, stocks are a $117 trillion market, and bonds are a $140 trillion market.

Now, to position oneself for this upcoming wave of adoption, Hougan noted the “cleanest way” is to “buy a basket of the top Layer 1 blockchain and infrastructure plays.” This, of course, puts ETH at the top as it is a “leader in tokenization and is well-positioned to win market share.” 

Besides ETH, he also mentioned SOL, XRP (XRP -0.21%), and LINK (LINK -0.27%).

When it comes to Ether specifically, the 2nd largest cryptocurrency also has spot ETFs that make it easy for traditional investors to gain exposure to the asset without having to buy ETH itself. These investment vehicles have been enjoying a nice pace of inflows for the last couple of months now.

Besides this, publicly traded companies are now also accumulating ETH. This week, crypto firm Bit Digital (BTBT -8.29%) converted its entire corporate treasury from Bitcoin to Ether, with its CEO, Sam Tabar, attributing this to his belief that “Ethereum has the ability to rewrite the entire financial system.”

Latest Ethereum (ETH) News and Developments

Regulatory Progress and the Road Ahead

The interest in tokenization is actually seeing a new wave of interest. Recently, Robinhood (HOOD -2.92%) introduced tokenized stocks on Ethereum L2 Arbitrum. 

The commission-free investing platform made a splash this month when it announced access to high-quality privately-held startups like OpenAI and SpaceX through tokenization. The product is only available to investors in the EU though.

These tokens are meant to reflect the valuations of the privately traded companies, but Robinhood CEO Vlad Tenev has clarified that the tokens aren’t “technically equity” but that they “effectively give retail investors exposure to these private assets.”

In a post on X, he called the promotion “a seed for something much bigger,” adding that “many private companies are eager to join us in the tokenization revolution.” 

The company has received backlash from OpenAI and is currently discussing its latest efforts with regulators. The brokerage is reportedly approached by entities like Lithuania’s central bank, which are requesting Robinhood details regarding tokens’ structuring and more.

Despite the regulatory scrutiny, Robinhood has already issued over 200 stock tokens on Arbitrum. 

And while the brokerage firm is facing some hiccups, Bitwise’s Hougan believes the tokenization trend is going to accelerate in the coming months because, “if Robinhood is rolling out tokenized trading, you can bet that Charles Schwab and others are studying it aggressively.”

Amidst this, SEC Commissioner Hester Peirce released an official statement this week to offer clarity to participants. Blockchain technology, she noted, has unlocked new models for distributing and trading securities in a “tokenized” format, which may facilitate capital formation and enhance investors’ ability to use their assets as collateral. She said:

“Enchanted by these possibilities, new entrants and many traditional firms are embracing onchain products.”

However, this doesn’t mean that these assets are outside the regulator’s purview. Peirce makes it clear that turning an RWA into a token doesn’t exempt it from the existing laws, and tokenized assets will still be regulated based on their underlying asset.

“As powerful as blockchain technology is, it does not have magical abilities to transform the nature of the underlying asset,” she wrote. “Tokenized securities are still securities.”

With her statement, crypto-friendly Peirce aims to provide clarity into the situation for a growing number of fintech startups, traditional banks, and institutions that are exploring tokenized assets to tap into greater liquidity.

To explain the regulatory aspect of tokenized assets, she illustrated how if a company tokenized its own equity and then a third party creates another product based on that, then the agency will still consider the original asset to decide the regulatory status of the wrapper. 

“Market participants must consider—and adhere to—the federal securities laws when transacting in these instruments.”

– Peirce

Her statement further pointed out that those who distribute, purchase, and trade tokenized securities must consider the nature of them as well as the resulting securities laws implications. She added:

“While blockchain-based tokenization is new, the process of issuing an instrument representing a security is not. The same legal requirements apply to on- and off-chain versions of these instruments.” 

Peirce also encouraged participants to engage with the SEC proactively to determine whether appropriate exemptions or tailored rule changes might apply. The securities regulator, she noted, supports thoughtful modernization and is open to working with the industry on that.

TradFi, however, isn’t the only one attempting to do that. Even crypto exchanges like Coinbase (COIN -1.5%) and Kraken are actively investing in bringing traditional assets on-chain.

Coinbase is reportedly looking to get regulatory approval to offer “tokenized equities” on its platform. Its chief legal officer, Paul Grewal, has called it a “huge priority” for the company. 

The exchange first tried to bring stocks on-chain back in 2021, by issuing a tokenized version of its own stock, but was stopped by the then-SEC Chair Gary Gensler. With regulations changing in favor of the industry under the Donald Trump administration, Coinbase feels positive about bringing forward security tokens.

“Tokenized debt, equity, and investment funds present an opportunity for tailored regulation for securities that are offered and traded via digitally native methods.”

– Grewal

Its rival, Kraken, meanwhile, is already offering tokenized versions of US equities called xStocks in select markets outside the US. The “open, instant, accessible and borderless exposure” to iconic US companies, according to Mark Greenberg, Kraken Global Head of Consumer, “is what the future of investing looks like.”

Overall, tokenization has grown to become a billion-dollar market with Ethereum emerging as its clear infrastructure leader. With the support of global financial giants and increasing regulatory clarity, the shift is clear: real-world assets are going on-chain, which means the future of crypto, tokenization, and Ether is bright and mega bullish!

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